contract law essay

Classified as a representation or a term of the contract

Cedric entered into a contract with the Distinguished Hotel for the wedding reception of his daughter Ali and groom Benno’s big day. In the contract Cedric made with the hotel he was assured that all 300 of his guests would be seated in the chosen function room with a view of the top table, on the day however some of the guests were placed in an adjoining conservatory without a view of the top table. For this to be a breach of contract will depend on whether the statement made between the hotel and Cedric can be classified as a representation or a term of the contract. If the statement was said to encourage a party to make a contract but does not actually form part of the contract this is only a representation. On the other hand a term will be an undertaking in the contract’s execution. (Furmston(2007): 157-159). Whether the statement made by the hotel is a representation or a term will be a question of the parties’ intention. (Elliott and Quinn (2010): 122). The statement in question is an important one and is likely to be a term rather than a representation. This could be indicated by considering whether the contract would have been made without the existence of this statement. (Banner v White (1861)). For Cedric it is arguable that having all the guests within the function room with a view of the top table was an important aspect for him and not having this goes against the contract’s intensions. Adding to this Cedric provided the hotel with the number of guests, and not unreasonably has relied upon the hotel managers specialist knowledge in offering his assurance of accommodating all the guests as described. (Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd (1965)). Furthermore the statement was made at the point at which Cedric was entering the contract, suggesting that it was in fact a term in the contract. (Routledge v McKay (1954)).

Terms are categorized into three types: conditions, warranties and innominate terms. In Cedric’s case there only appears to be ‘disappointment’ within the wedding party. This being taken into account it is likely to be considered a warranty as the breach is only trivial in relation to the overall reception provided. (Hong Kong Fir Shipping Co. Ltd v Kawasaki Ltd (1962)). The remedy that can be sought by Cedric would be damages for compensation for the breach.

The second issue was the food poising of the guests due to poorly cooked chicken. As a direct result of this Cedric could sue for breach of contract. In the contract certain terms are implied by law under the Supply of Goods and Services Act 1982. Section 13 of the Act details that the supplier will carry out a service with ‘reasonable care and skill’. The key question for the hotel they delivered a service with ‘reasonable care and skill’. The fact that the food poising was caused by improperly cooked chicken would suggest that they did not and therefore fell below the standard of care required under the Act. The facts would suggest that poising guests would be a serious breach of contract meriting a refund or substantial reduction of the reception cost.

Another issue for the hotel is that the poisoned guests may sue for negligence. In order to determine the liability in the tort of negligence it is necessary to establish all three elements of negligence on the basis of the facts: (Bermingham and Brennan (2010): 38)

Whether a duty of care existed between the hotel and the guests?

Whether actions taken by the hotel broke that duty of care?

Whether the breach caused the damage of a legally recognizable kind to the guests?

It can be argued that the hotel owed all the guests a ‘reasonable’ duty of care to avoid such acts or omissions, which could be reasonably foreseen as likely to cause injury. (Donoghue v Stevenson (1932)). Obviously the hotel could have easily foreseen that food preparation could impact on the guests. Additionally the relationship between the hotel and the guests was of a sufficient proximity that actions taken by the hotel would impact the guests. This type of relationship is one that can be considered ‘just, fair and reasonable’ to impose liability as there is reasonable reliance upon the hotel to provide satisfactory service.

A duty of care is breached when the defendant does something in the same circumstances that the reasonable person would not do. (Blyth v Birmingham Waterworks (1856)). It can be argued that no reasonable hotel would serve food improperly cooked, as the magnitude of risk to the guests would be heightened by improperly cooked food. (Bolton v Stone (1951)). Taking simple hygiene and cooking measures could have easily prevented this. The hotel has breached its duty of care by failing to provide safe chicken fit for human consumption.

The final stage in a claim in negligence is causation and determining whether the food poising would have not occurred if it had been properly cooked. The damage sustained by the guests must be attributable to the hotel and be the type of injury, which could have been reasonably foreseen. (Overseas Tankship (UK) Ltd v Morts Dock and Engineering). It is clearly evident from the facts that the chicken caused the food poising and this type of injury could have been easily foreseen.

However, for the actual claim sought by Ali and Benno the compensation will be damages, whilst they are seeking compensation for the honeymoon and its repurchase the courts will examine what damages they are entitled to. It is likely that the court would award damages for the loss of their honeymoon as it could be reasonably foreseen that poising the wedding party would result in losing out on a honeymoon. However it will be very unlikely that they would be successful in claiming a holiday to the Far East for two weeks, the level of compensations will be for the value of the honeymoon to Eastbourne as the courts will be unwilling to allow the couple profit from this.

In summary the hotel is going to be liable for the cost or a proportion of the cost of the wedding reception, because there are at least two actions of breach of contract for failing to have all the guests seated together with a view of the top table and for failing to exercise reasonable care in ensuring food served would be fit for consumption. There is also an action in negligence for Ali and Benno for compensation in claiming damages for the loss of their honeymoon to Eastbourne. It is unlikely that they would be legally entitled to force the hotel to pay for the honeymoon to the Far East as this would allow them to profit and upgrade their honeymoon.

One of the most controversial issues in modern contract law is the conclusion of contracts entered into at a distance. The now dated postal rule of acceptance has caused much debate as to whether it should be applied with respect to contracting through email and other instantaneous communications.

The postal acceptance rule was first established in the case of the court of Adams v Lindsell (1818) when the court had to decide the moment of contract formation by post. The prevalent situation was time consuming and there was a need to improve business certainty in the communication of acceptance. The problem being that parties found when communicating acceptance by post were not sure of the precise time of acceptance had been communicated. Postal communication is subject to delay, leading to parties not being simultaneously aware of the communication. Thus, Lord Herschel defined the rule as follows:

“Where the circumstances are such that it must have been within the contemplation of the parties that, according to the ordinary usages of mankind, the post might be used as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted"

One was of thinking about this is the offeror nominates the post office as implied agent and thus the post office receiving the acceptance is regarded as that of the offeree. The main effect of the postal rule is that the risk of the acceptance being delievered late or lost in the post is placed upon the offeror, if the offeror does not want to accept this risk, they can always require an actual receipt as a condition before being legally bound.

In consequence of the above rule, there have been several challenges caused by the above rule in modern day contracts. The problems caused from a substantial delay in the delivery of a letter or one failing to be delivered coupled with technological advancements have caused a change. This change is an increase in the use of instantaneous communications; moreover the courts have followed a radically different position.

The uncertainty regarding the moment of contract formation does not happen in the environment of face-to-face communication or even in distance contracting where an instantaneous method of communication is used. As in this kind of contracting, all parties are aware of contract conclusion and they do not face problematic issues such as delay or failure of transmission. It could be argued that the postal acceptance rule was becoming irrelevant and led the court in Entores Ltd v Miles Far East Corporation (1955) to rule as follows:

“The courts in more recent times and in the light of more modern means of communication have shown no disposition to extend the [postal acceptance rule] to instantaneous forms of communication".

The implication of the above decision points to the fact that the acceptance would not be effective until it had actually been received since the modern communication systems have several delivery report mechanisms that would readily inform the offeree in cases of proper delivery such as communications made via telephone, telex or fax.

With regards to email and other instantaneous communications being used for the communication of acceptance of the terms of a contract, the opinion has been that the general acceptance rule should apply. (Hill (2004)). This is certainly the case of acceptance transmitted by the clicking of a button on a website, there is no real lag between the sending of the offer and a reply of acceptance. Email messaging however is slightly different. Even though when parties send an email message it is sent immediately, it might not be received immediately. This has led it to be suggested that the postal rule should be applied to the transmission of acceptances through email messages.

It should be noted that there is no legislative authority for determining how email acceptances should be treated. However in the United Kingdom, there is authority for the process of contracting through websites. (Act 9, 10 and 11 of the E-Commerce Directive 2000). Furthermore, the Refulations of Electronic Commerce 2002 do not provide for instances when it can be said that an email message has be sent or when it has been received. This could have helped solve the issue of transmission of acceptance through email messaging.

The Electronic Commerce Directive requires member states to establish a somewhat complicated rule and provides in its Article 11 that Member states shall ensure, except when otherwise agreed by parties who are not consumers, that in cases where the recipient of the service places his order through technological means, the following principles apply: the service provider has to acknowledge the receipt and they are deemed to be received when the parties to whom they are addresses are able to access them.

What this means is that no communication be emails is said to be effective unless it is received and understood by the person to whom it is addressed. (Stone (2005)). Even though it is the exception rather than the rule that an email message will be delayed, it must be accepted that it still happens, and potentially not be delivered at all.

In addition to the above, the postal acceptance rule would best serve the needs of contracting parties in instantaneous communication of acceptance to the terms of a contract as it would avoid any business uncertainty with regard to the timing of email contracts.

In summary that with regards to click contracts which are instantaneous with both parties being aware of the acceptance with no lag, the general rule of acceptance should be applied. However with regards to email contracting which could be subject to delays, the postal acceptance rule would be more applicable.

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